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Migration and democracy

Migration has numerous effects on both the source and destination country. The most direct of which of course include the potential drop in wages in destination countries (at least for some skill levels), and the loss of educated individuals (brain drain) in source countries.

There are, however, lots of other more indirect ways in which migration can influence countries. For instance, in the destination country migration can increase the size of the informal labor market, but it can also create more jobs. In the source country, while there may be brain drain, migration prospects can lead to additional human capital accumulation, and remittances can be of huge help for those who stayed at home.

Another way migration can influence the source country is through its effects on source country institutions. This is the topic of this post. In a sense migration is competition between countries: if people don’t like their country, they sort of vote with their feet. They leave. This should incentivize governments to do what the people want. But of course, migration is not completely unregulated, so there are limits to influencing the government in this way.

But migration opportunities have been documented to lead to higher education investments in developing countries. This is because more educated people have better chances of emigrating. Of course, not everyone can emigrate, so in a way just the existence of the phenomenon of migration can help raise human capital (e.g. education) in developing countries.

Finally, democratic values can be transmitted back to the source country by migrants. This can happen directly via return migration, or indirectly via supporting local political movements, talking to relatives who stayed at home, etc.

On the other hand, migration is not a homogeneous thing. Specifically, more educated and skilled people tend to emigrate more often. These people are generally more politically active. This means that it is people who care more about the political situation that emigrate more. Thus the opposition to the current government can shrink because of migration (Mexico and Haiti are great examples of this). And the remittances that those who stay at home receive can alleviate a potentially bad financial situation of the population. This is positive, but on the other hand it may also delay change, because the people will not be completely unsatisfied.

Previous literature have shown that people who emigrated to democratic countries, and then later returned home have a positive effect on democracy in their home countries. This doesn’t seem to hold if the destination country was undemocratic though. Docquier et al. (2014), however, look at migrants who did not return. Can they influence home country institutions? The data used only includes OECD destinations, that is to say all destination countries can be considered democratic.

The authors estimate two models using various econometric techniques. First, they use a static model, which assumes that institutional quality (i.e. the extent of democracy), the migration rate and other variables are in a steady state. This roughly means that it is assumed that the variables reached a level from which they do not deviate unless some external shock (such as a new government, or looser visa requirements) happens. This can be thought of as a long-term model, because in the long-term – while there may be all kinds of transitory shocks – on average a country stays on this steady state unless a permanent shock happens, which may put the country on a new steady state. The authors use 2005 data for this model.

Using several specifications, Docquier et al. (2014) find that the migration rate has significant positive effect on institutional quality in source countries. Higher human capital levels also correlate with higher institutional quality. Quantitatively, a 10 percentage point increase in the migration rate raises standardized institutional quality scores by 12-15 percentage points. The relationship is stronger for political than for economic institutions.

Second, the authors estimate a dynamic model, which is supposed to model the short-term effects of migration on institutions. They use as predictors of current institutional quality the institutional quality five years earlier, migration rate five years earlier, human capital levels five years earlier, and various other controls, also lagged by five years. The lags represent the fact that institutions need time to react to changes in these variables. What is found is that migration also affects institutions in the short run, significantly and positively. Furthermore, human capital and previous institutional quality are also important predictors. This also shows that institutions are indeed persistent.

Robustness checks include using a more sophisticated econometric technique to estimate the model, which indicate that human capital may not necessarily be an important predictor of institutions, but migration retains its positive influence. Furthermore, the models are robust to using different subsamples (for instance by excluding socialist or oil-producing countries). And the authors also find no heterogeneous effects across skill groups. In other words, both low-skill and high-skill emigration rates seem to predict institutional quality.

The conclusion is then that migration rates are good predictors of institutional quality, better than human capital. And that during the years between 1985 and 2005, emigration to democracies from developing countries had a significant positive effect on these source countries’ institutions. Thus as we can see, on average at least, migration contributes to democracy in developing countries.